Economic Protectionism versus the State of the World

If Hezbollah Collapses, It Opens The Curtains On Israel Vs. Iran By Michael Every of Rabobank

September 25, 2024

Opening paragraphs:

"Is our presidents and economists learning?"

President George W. Bush once bewailed: “Rarely is the question asked: ‘Is our children learning?’” With radical ideas thrown around by Harris and Trump pre-election, economists are asking the same about presidents. However, presidents can rightly ask it about economists.

Trump just underlined his protectionist plans for "ultra-low taxes and regulations" zones, appointing a "manufacturing ambassador” to persuade firms to relocate to the US, and that “American workers will no longer be worried about losing your jobs to foreign nations. Instead, foreign nations will be worried about losing their jobs to America.” Economists are appalled. Yet they have no problems when an emerging market sets up low-tax and regulation zones and lobbies Western firms to close factories and move production there, with a loss of jobs. This is celebrated as “FDI”. Of course, economists say one case involves higher prices, and the other lower prices. In short, the morality of targeting other states’ industries and jobs revolves around price, not value (or values). That’s cold, hard realpolitik logic for the liberal humanist West, which never applies it to how one treats one’s own family: politically, the issue is then how one defines ‘family’.

Yet protectionism was staggeringly successful for the US in the past; and Germany; and Europe; Japan; South Korea; and China - all of them used it to climb the development ladder. To presume all you get from tariffs is inflation is to argue the US should today be solely the seller of commodities it was in the 18th century; Europe should be buying British goods and selling them food as the UK industrialised first; and Japan, South Korea, and China should be specialists in rice, not tech. You can see how ridiculous these arguments are, and we are all better off that they aren’t, even if via protectionism. Yes, tariffs can be a “tax on consumers” if you assume nothing changes but price. However, if they generate higher or better-paid employment, and increase production to attain economies of scale, tariffs can be moderately inflationary and a major stimulus to industrial growth.

He used several terms I wasn't familiar with so I looked them up:

• FDI - Foreign Direct Investment
• SME - Small and Medium-sized Enterprises
• Diocletian - Roman emperor (284-305)
• Edict of Diocletian - denounces greed and sets maximum prices and wages for all important articles and services.
• Vegetius - 4th century AD Roman writer
• PBOC - People's Bank of China
• RRR - Required Rate of Return
• bps - basis points. One basis point is equal to 1/100th of 1%, or 0.01%.